Business Owners: When your future income rests in the hands of someone else (Part 1)

Business Owners: When your future income rests in the hands of someone else (Part 1)

Walking into the coffee shop I didn’t know what to expect, as a life insurance agent I hear many interesting stories – which is why I love what I do. I saw John, a business owner who I met through LinkedIn, already sitting down with his coffee. After some time, we started to discuss John’s business. It’s a well-oiled machine, being in existence for 30+ years with 7 other team members. In fact, it is so well organized that he has taken a backseat roll to focus on other passions of his.

As we started to discuss the dynamics of his business, John said to me, “The existence of our company relies on my business partner, Paul.” You see, the line of business John and Paul are in is so specific that very few people have the knowledge that Paul has about the industry they work in.

John continued, “If Paul wasn’t here, our company would likely fold.”

I asked John what his plan was for the business, “Do you want to be bought out or do you enjoy the fact that you’ve been able to step back from the business while maintaining a stream of income?”

To be honest, John was not fully clear on what his future intentions would be with the business. However, one thing was for sure, “David, I love the income I have coming in. I’m able to focus on other businesses and hobbies and don’t have to worry about money coming in the door. I’d like to see this income continue for at least the next 10 years.”

To recap: John wants income from the business for at least the next 10 years and John is dependent on Paul for the business to exist.

Paul has 0 intention of ever leaving the business but, life doesn’t always go the way we expect it to. I asked John what would happen if Paul died tomorrow. “John, where would your income come from?”

He didn’t have an answer and truthfully, I’m not sure he ever considered this before. Why would he? It’s a pretty morbid thought after all.

I asked John if he would like a way to guarantee that income would come in for the next 10 years irrespective of what happens to the business. “Yes, of course”, John said.

“John, what you can do is purchase a life insurance policy on Paul for the amount income you’d lose over the next 10 years if Paul was to pass away tomorrow.” I continued, “This is a way for you to hedge against the potential loss of income. We hope the business keeps operating for the next 10 years and you continue to receive your income, however, if something were to happen to Paul, a life insurance policy ensures your income is protected.”

This is technically a form of ‘key person insurance’. John mentioned the idea to Paul, he was on board. 

We implemented a 10-year term life insurance policy on Paul’s life for the amount of money John thought would be adequate to act as income replacement if Paul were to die in the next 10 years.

This sparked a second conversation around the position Paul would be left in if John were to die. How would Paul buyback John’s shares from John’s beneficiary?  To be continued…  

To learn more about financial planning for business owners send me a message via LinkedIn or at


I will never grow tired of that view. This was shot at Lefay Resort and Spa in Lake Garda – which is in Northern Italy, east of Lake Como. This was the start of our Italy adventure and the start to our honeymoon. A beautiful resort, 20 minutes up the mountain which overlooked the lake down below. A perfect way to unwind before traveling throughout italy for 2 weeks.

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